John Thaler’s JAT Capital Management is very successful. JAT Capital Management is a global long short fund with more than a couple billion in assets. According to the SFGate, JAT was up 13% YTD through the end of October after growing 31% in September. JAT Capital is also bullish about Netflix.
John Thaler’s JAT Capital and Netflix
Netflix (NFLX) was JAT’s sixth largest holding at the end of the second quarter. At the end June, JAT owned 467,812 shares of the video rental and streaming company after having increased its position by 45% in the second quarter. At that point, NFLX was up 50.21% on the year, having moved from $178.41 a share at the beginning of the year to finish the quarter at $267.99. Today, NFLX is down 55.11% YTD, trading at just $80.09, a loss of over 70% since the end of the second quarter. In other words, JAT’s investment value went from being worth roughly $125.4 million at the end of the second quarter to be worth just $37.5 million as of the 1st of November. Thaler wasn’t worried though. He continued building his fund’s investment in the company. Pushing his fund’s stake in the company to 5% of Netflix on September 20, then increased it even further, by 2.6% over the next 10 days. On September 30th, Thaler filed a 13G with the SEC announcing his JAT Capital owned 7.6% of NFLX, or 4,017,691 shares.
Reed Hastings and Netflix – Where’s the Love?
While Thaler appears secure in his investment in NFLX, Netflix’s CEO does not. According to the SEC, Reed Hastings has sold 5,000 shares of NFLX stock almost every week from January 20th to October 6th. Hastings has stock options which allow him to buy NFLX stock at $1.50 a share, so he buys 5,000 every week and sells the same 5,000 immediately thereafter. He doest even own one share directly, so why is he selling them all? Even his family trust which indirectly owns 1,132,215 shares in NFLX as of his October 6th filing has sold a significant volume of NFLX stock since January. Hastings’ family trust had owned 1,267,085 shares at the filing on January 20th.
In other words, Thaler’s JAT Capital has over 4 million shares in NFLX, which it bought at full price, Reed Hastings doesn’t actually own any NFLX stock directly and his family trust directly owns 1.1 million shares after selling off 134,870 shares so far in 2011. Where’s the love, Reed Hastings?